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Chapter 18Rules of Originfor FTAsIn this chapter . . .• The important role of Rules of Origin• Qualifying your goods• Product-specific and percentage-based rules• Doing the mathOne of the key ways to take advantage of the Free Trade Agreement (FTA) is to understand theRules of Origin (ROOs). Put simply, to qualify for the reduced-duty benefit, the product exportedmust originate from an FTA party or must contain a specified percentage of U.S. inputs andcomponents. Each FTA has its own Rules of Origin that describe how exported goods shipped to acountry or a region may qualify for duty-free or reduced-duty benefits. Because the ROOs are FTAspecificand product-specific, they need to be followed carefully.The next section presents a general overview of the steps that must be taken before a goodcan be qualified for an FTA benefit. The different types of ROOs are examined, and the specificways products may qualify for FTAs are explained. These include the concept of substantialtransformation and product-specific and percentage-based formulas used in qualifying productsfor FTAs. How the ROOs are applied to specific FTAs is explained, and the ROOs for textiles,chemicals, and agricultural products, as well as the de minimis provision, fungible goods, andshipping spare parts and accessories, are all discussed.To receive preferential treatment under an FTA, the exported good:1. Must be made in the FTA territory2. Must meet the appropriate Rule of Origin pertaining to specific products and the specific FTA3. Must be documented as originating via appropriate certifications or information provided tothe importer or its representative brokerEach FTA contains a specific chapter on Rules of Origin Procedures and lists all product-specificROOs by Harmonized System (HS) numbers. The final texts of all FTAs can be found at1.usa.gov/1ph6Np9.U.S. Commercial Service • A Basic Guide to Exporting201
Basic Steps to Qualify a Product for Duty-Free orReduced-Duty Benefits1. Obtain the product’s HS classification number by locating the Schedule B codeat uscensus.prod.3ceonline.com, and use the first six digits of the Schedule B toconvert it into the HS number.ŦŦNote: The product must be made in an FTA country and shipped directly to beconsidered for an FTA benefit.2. Determine the duty (tariff) rate. See if there is a duty difference between thestandard (Most-Favored-Nation, or MFN) and preferential rates by searching theCustoms Information database at export.customsinfo.com, or the FTA Tariff Toolat 1.usa.gov/1wsnrTj.ŦŦIf there is no duty advantage—that is, the duty rate is alreadyset at “zero,” or if the FTA rateis equal to or higher than theMFN rate—there is no need toqualify the good (unless the Australia 17.818 26.13 31.208importer specifically requestsit, in which case the product Bahrain 0.684 1.017 1.21still needs to “qualify for an FTA Canada 207.371 301.609 292.443preference”).Chile 1.093 17.514 18.885ŦŦUse standard shipmentColombia 13.328 18.391 16.394procedures (i.e., regular exportdocuments apply withoutCosta Rica 4.86 7.223 7.23the need to fill out the NAFTA Dominican 5.379 7.158 7.097certificate).RepublicŦŦNote: For larger shipments,El Salvador 2.223 3.274 3.09even if there is no tariffadvantage, you may still wantGuatemala 4.038 5.554 5.913to qualify a good for NAFTA, Honduras 4.064 5.373 5.733since goods accompanied byIsrael 10.571 13.747 142.701the NAFTA certificate would geta “break” on the merchandise Jordan 1.078 2.082 1.766processing fee.Korea 30.184 41.714 42.317ŦŦIf there is a duty advantage,Mexico 159.435 226.079 216.331proceed to qualifying yourproduct for an FTA (step 3).Morocco 1.556 2.482 2.175Nicaragua 0.654 1.059 1.1283. Qualify your product for an FTA.Oman 1.191 1.571 1.747ŦŦIf the product contains all FTAoriginating inputs and yourPanama 6.811 10.563 9.924product qualifies, proceed to Peru 6.783 10.101 9.357certifying the origin (step 6).Singapore 20.091 30.671 30.56ŦŦIf the product contains anynon-FTA inputs (or unknown Total 499.213 733.312 847.21origin inputs), identify HS codesfor all these inputs and proceedto identifying the specific ROO (step 4).U.S. FTA Exports by Country(USD Millions, 2012–14)Country 2012 2013 2014 (YTD)4. Identify the specific ROO for the final product that you are exporting byconsulting the USHTS General Notes or visiting export.gov/fta and locating aROOs chapter in the final text of a relevant FTA agreement (the ROOs are listedby HS codes).202U.S. Commercial Service • A Basic Guide to Exporting
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A BASIC GUIDE TOEXPORTINGThe Offici
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export.gov/basicguideLibrary of Con
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Table of ContentsChapter 1: Introdu
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global GDP and 30 percent of global
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A GEE might consist, for example, o
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Success StoryPedaling Through Trial
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Chapter 2Developing anExport Strate
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specified in the EAR under a specif
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All U.S. businesses have many ways
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Answer these 11 questions:1. Which
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Product or Service• What need doe
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Sample Outline of anExport PlanTabl
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5. Current Trends and Practices•
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16. My Product’s Harmonized Code
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Success StoryDownloading NewInterna
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This last advantage is especially i
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Gathering and evaluating secondary
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Drawing ConclusionsAfter analyzing
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United Nations Statistical Yearbook
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Private-Sector Product and Industry
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Success StoryHelping Feed the World
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Chapter 4Export AdviceIn this chapt
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Some of the more important services
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the important difference that the b
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at no cost to the small business ex
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A commercial bank can perform many
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location and construction of manufa
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To prevent reverse engineering in C
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We are agnostic on the question of
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Distribution ConsiderationsHere are
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Often, the first company does not p
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your ability to terminate agreement
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Once your company has prequalified
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Choosing a ForeignRepresentative or
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Success StoryDon’t Wait—Innovat
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Chapter 6Finding QualifiedBuyersIn
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companies are available from many p
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Trade Fair Certification Program (e
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Millennium Development CorporationT
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Who Is the “Ideal”International
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Scores of new franchising concepts
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Success StoryCast a Wide Net to Cat
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Chapter 8Preparing YourProduct for
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You can also contact the Office of
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training seminars, or DVDs. Zeigler
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The ChallengeSmith first looked tow
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encompasses services in transportat
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give U.S. companies a competitive e
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Success StoryRecruiting New Franchi
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Chapter 10International LegalConsid
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For more information from the U.S.
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When goods enter a bonded warehouse
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under the UCC. Older works may also
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Trade names are also protected on a
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knowledge, in turn, promotes furthe
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prevent him or her from obtaining a
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Business-to-Consumer E-Commerce Wor
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Because such a website is often sta
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An online exporter may choose to pu
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important to identify and incorpora
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other business contacts) options re
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Success StoryGrowing Strong withInt
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Chapter 12Shipping YourProductIn th
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One popular method of shipment is t
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Certificate of ConformityRequired b
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The cost of the shipment, delivery
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To learn more about comprehensive r
Page 140 and 141: China but needed to do a lot of hom
Page 142 and 143: price is too high, the product or s
Page 144 and 145: CompetitionIn the domestic market,
Page 146 and 147: Commonly Used TermsIt is important
Page 148 and 149: Success StoryAligning Innovationwit
Page 150 and 151: Chapter 14Methods ofPaymentIn this
Page 152 and 153: Letters of Credit and Documentary C
Page 154 and 155: You must provide documentation show
Page 156 and 157: associated with open-account trade
Page 158 and 159: payment. This is because the export
Page 160 and 161: ut they were willing to make the sm
Page 162 and 163: • The need for preshipment financ
Page 164 and 165: Thus it is in your best interest to
Page 166 and 167: to support ongoing export sales or
Page 168 and 169: To be eligible, a business must hav
Page 170 and 171: Medium Enterprise Department and OP
Page 172 and 173: Success StoryManufacturingInternati
Page 174 and 175: Chapter 16Business TravelAbroadIn t
Page 176 and 177: Planning an ItineraryTravel agents
Page 178 and 179: Business Culture TipsAlways answer
Page 180 and 181: Gift giving is an important part of
Page 182 and 183: particularly intense issue. So the
Page 184 and 185: Here are a few suggestions.• Expe
Page 186 and 187: Building a Working RelationshipOnce
Page 188 and 189: negotiations and agreements with it
Page 192 and 193: 5. Determine if the foreign content
Page 194 and 195: The original ROOs are listed in an
Page 196 and 197: Example Rules of OriginCombining Mu
Page 198 and 199: Israel, Jordan, Morocco, Bahrain, a
Page 200 and 201: The importer may ask the exporter w
Page 202 and 203: Generic CertificatesIf a good does
Page 204 and 205: Architectural Association of Kenya
Page 206 and 207: Appendix A: Glossary of TermsAdvanc
Page 208 and 209: Export-Import Bank of the United St
Page 210 and 211: Market SurveyReport that provides a
Page 212 and 213: Appendix B: Definitions of Abbrevia
Page 214 and 215: Appendix D: FormsHere, you will fin
Page 216 and 217: 228U.S. Commercial Service • A Ba
Page 218 and 219: Tech International1000 J Street, N.
Page 220 and 221: COMMERCIAL INVOICESELLER: INVOICE N
Page 222 and 223: Copyright © 1998 UNZ & CO.SHIPPER/
Page 224 and 225: DEPARTMENT OF HOMELAND SECURITYU.S.
Page 226 and 227: PACKING LIST© Copyright 2001 Unz &
Page 228 and 229: 1a. U.S. PRINCIPAL PARTY IN INTERES
Page 230 and 231: U.S. $13220of this FIRST of Exchang
Page 232 and 233: IndexAA2ASee account-to-account (A2
Page 234 and 235: Global Entrepreneurship Ecosystem (
Page 236 and 237: Swinko, RonSee Jet IncorporatedSzuc
Page 238 and 239: International OfficesAfghanistanKab
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